If you are in need of a significant amount of money and own property, then a Loan Against Property is an attractive, and relatively reasonable, credit option to consider. People often view a property as being of value only in bringing in rental income or selling at an appreciated price. It is often overlooked as an asset when raising funds for business or personal expenses. If you are in need of substantial funds, you can unlock the dormant potential of your property and raise funds at a relatively lower interest rates than a personal loan.
What are Loan Against Property interest rates?
There are two types of interest rates on such loans:
Fixed rate of interest: The interest rate remains the same for the entire duration of the loan. Lenders usually offer this type of interest rate for a pre-specified tenure of loan, and many may not offer this as an option for a loan against property.
Floating rate of interest: The interest rate changes according to prevailing market rates. Since the rate changes and is dependent on fluctuating market conditions, it is not possible to predict a typical rate.
The floating interest rate is linked to the Marginal Cost of Funds based Lending Rate (MCLR). The rates are typically published on the lender website and could change periodically. In general, the interest rate on this kind of loan could range from 11%-15% per annum.
How do the interest rates affect the EMI?
The floating interest rates could change on a regular basis, depending on your lender, leading to a potential change in your EMI as well. You may, however, choose to leave your EMI amount unchanged by changing the tenure of your loan. The longer the tenure, the lower the monthly EMI burden will be. If there is a change in the rate, you will be notified in advance by the bank. If you have chosen to repay your loan with post-dated cheques, you will need to pay the difference between the existing interest amount and the new interest amount separately.
Your EMI could also change if you make a partial pre-payment on your loan. Full prepayment of the loan is also possible in many cases. When making any prepayment – whether full or partial -keep in mind that it is subject to the terms and conditions of the loan regarding charges.